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City employees receive retirement benefits from one of two state-sponsored systems. Most city employees (and elected officials that receive coverage) are covered under the Iowa Public Employees’ Retirement System (IPERS) while certain public safety personnel from mostly larger cities participate in the Municipal Fire and Police Retirement System of Iowa (MFPRSI).
IPERS
The Iowa Legislature created IPERS in 1953 to provide a dependable and economical retirement plan for Iowa’s public employees. IPERS retirement benefits are intended to help Iowa’s public employers attract and keep qualified personnel in public service.
- Coverage
Most city employees are covered under IPERS; however, there are specific exceptions. Part-time elected officials and elected officials paid on a fee basis are covered unless they specifically ask not to be covered. Temporary employees (individuals hired to work less than six months or on an irregular, seasonal or on-call basis) are excluded from coverage. However, in some cases a temporary employee may become eligible for IPERS coverage if an “ongoing relationship” with an IPERS employer is established when wages paid are $1,000 or more for two consecutive quarters, or when employed for 1,040 hours or more in a calendar year. Another notable exception is if the employee is eligible for another retirement system such as MFPRSI. - Membership Classes
Most city employees and elected officials are eligible for the Regular Membership Class of IPERS, while many public safety positions are eligible for the Protection Occupation Membership Class. Protection occupations include firefighters, police officers (including part-time officers) and emergency medical service providers. - Contribution Rates
IPERS is a partnership between employees and employers who split the costs of contributions. IPERS sets contribution rates using an actuarial valuation of the system, which is a snapshot of IPERS’ finances. Contribution Rates for both systems are set annually. For both city membership classes, employees pay about 40 percent of the total contribution and employers pay about 60 percent. The rates for Protection Occupations are higher since these positions generally work for fewer years and retire from their positions sooner than Regular Members. - Benefits
IPERS is a defined benefit plan which provides a lifetime benefit calculated using a formula. Benefits grow as a result years of service and salary increases over a working career. IPERS offers Retirement Calculators that can assist in the projection of retirement benefits.
Municipal Fire and Police Retirement System of Iowa
The Iowa Legislature created MFPRSI in 1990 to provide a retirement plan for certain police officers and firefighters. Cities required to participate in the program are those with public safety departments that were subject to the state’s civil service law in 1990; these cities needed to have a population of more than 8,000 in 1990. The plan also covers cities that voluntarily elect to participate in the retirement program. In total, the plan covers employees from 49 cities. Because the guidelines for the program are included in Chapter 411 of the Code of Iowa, the system is often referred to as the 411 System.
- Contribution Rates
The contribution rate structure is set by the Code of Iowa. The rate for covered employees is set at 9.40 percent of earnable compensation and currently does not fluctuate. The employer contribution rate is established each year by the MFPRSI Board of Trustees following an actuarial valuation of the system. Employers are required to pay a minimum of contribution rate of at least 17 percent. - Benefits
MFPRSI is a defined benefit plan which provides a lifetime benefit calculated using a formula. Benefits grow as a result of years of service and salary increases over a working career. MFPRSI offers Retirement Calculators to assist in the projection of retirement benefits.
Early Retirement Incentives
At times, public sector employers offer incentives to employees to retire early. In most cases, these programs are designed to allow higher-paid employees with relatively long tenures to voluntarily retire. Incentives can include cash payments and continued employer payments of health insurance and other benefits. Such incentive programs often have the goal of transitioning higher-paid employees out of the workforce in favor of more inexpensive wage earners. Cities should enlist the assistance of a human resources consultant to confirm the amount of savings that can be realized by such plans. The city attorney should also review the plan to make sure it complies with various personnel laws including the Age Discrimination in Employment Act.
